Federal Maritime Commission to examine confidential ocean cargo service contracts

Peter Friedmann, executive director of the Agriculture Transportation Coalition met with Federal Maritime Commisssion Chair, Richard A. Lindinsky, last week to discuss confidential service contracts and their negative impact on U.S. exports.

According to Friedmann, the FMC is keen to explain to shippers the benefits of the proposed “Freight Index.”

Supporters of a freight rate index claim two benefits, he added.

• First, it provides a “benchmark” as to the rates in a particular trade lane. If it was commodity specific, it would provide a benchmark for rates of that commodity in a particular trade lane.  
• Second, to provide a basis by which a shipper could “hedge” freight rates, and thus avoid surprise increases for a period of time, say, 6 months.  Various investment firms, are very interested, in participating in this initiative. They would create a new trading vehicle that would be available for hedging purposes.

Friedmann said there are still many questions, however. Would such a benchmark be useful? Is it appropriate to use confidential service contract data to create a public index? What if someone doesn’t want his or her information included? Might publication of rates in specific trade lanes for specific traffic might enable third parties to identify the shipping patterns and rates of certain shippers, and thus create a competitive problem?

“This proposal deserves careful consideration, if only because Lidinsky is the first Chairman of the FMC who has been willing to say, publically and repeatedly, that his overriding objective is to assure an ocean transportation system that serves the needs of U.S. exporter,” said Freidmann. “He is genuinely interested in understanding if the shipping public would find freight rate indexing useful, and if the Commission should extract the rate information from contracts, for a broad freight index?”
 
Lidinsky is scheduled to address the annual conferences of the National Customs Brokers and Forwarders Association of America April 24 in Hollywood, Fla. and at the and the Agriculture Transportation Coalition June 21 in San Francisco,